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What Contractors Can Do Now to Ensure a Positive Surety Meeting in 2023?

By January 30, 2023February 2nd, 2023No Comments

Over the past year, there have been many hot topics that surety partners have been speaking with their clients about at annual meetings: Supply Chain Disruption, Material Price Volatility, Labor Shortages, Inflation, Increased Competition, and Ownership Transitions. Across the board, these subjects have been items of uncertainty for most contractors. As we go into 2023, most industries are seeing supply chain disruptions easing and pricing becoming a bit more manageable. However, labor continues to be area of concern as contractors are increasing salaries and adding other incentives to attract and retain top talent.

How Will These Issues Affect the Industry?

Surety companies are seeing an uptick in claims notices in 2022… not actual claims. These notices are usually a precursor to future claims, so surety companies will be extra vigilant in the next few years as they expect to see claims come through. You can expect surety companies to begin to ask more questions than in prior years at your annual meetings and on a per project basis. They may even tighten up on their support levels. Some sureties are being more stringent on their underwriting philosophy and/or may completely change their appetite while others will just be more cautious over the next few years. You need to make sure that you are covered when the time comes, and you should be asking your surety questions regarding this when you meet with them to make certain that everyone is on the same page.

What to Consider Before Meeting with your Surety

  • Maintain continued discipline in your bidding process
  • Preserve liquidity
  • Improve cashflow by staying on top of collections or asking for more favorable payment terms or less retainage being held where possible
    • Be ready to talk about any late stage underbillings or larger underbillings
    • If overbillings are larger than usual, and your cash position does not cover these future costs, be prepared to talk about this
  • Limit bank line usage as much as possible
  • Increase your bank line when needed
  • Maintain continuous, open dialogue with your surety agent
  • For firms using subcontractors – prequalification is key as the smaller companies will be affected most
  • Track your available surety capacity
  • Utilize a back-up surety partner

 

If you would like more information on anything mentioned above, please contact Crystal Bennis, Surety Bond Executive at McConkey, for further information. Our services include surety program review, contract review, prequalification process implementation.

Crystal Bennis, AFSB

Crystal Bennis, AFSB
Surety Bond Executive

717-505-3142

Alex Kauffman

Alex Kauffman
Surety Bond Executive

717-505-3124

Crystal Bennis

Author Crystal Bennis

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